Reimbursing employee and volunteer expenses without tax mistakes

Current to October 11, 2026. This article is for information; it does not replace legal advice.

Travel, supplies, meals at an event: your employees and volunteers often pay out of pocket for the organization. Reimbursing them properly keeps an amount from becoming taxable by mistake, simplifies your financial audit and shows your team that their commitment is respected.

Who sets the rules

The Canada Revenue Agency (CRA) sets the federal tax rules everywhere in Canada, and it also administers provincial or territorial income tax in every province and territory except Quebec. In Quebec, Revenu Québec also applies its own rules, which are very close to the CRA's. An organization with employees in Quebec therefore follows both.

Three ways to pay

The CRA distinguishes three types of payments:

• reimbursement: you repay amounts actually spent for the organization; the person completes an expense claim with receipts;
• allowance: an amount paid without the person having to account for its use;
• accountable advance: an amount given before the expense; the person provides receipts and returns what they did not spend.

A reimbursement of expenses actually incurred for the organization, supported by receipts, is generally not a taxable benefit. An allowance may be taxable depending on its form.

Use of a personal vehicle

The principle

Driving for work between two work locations, or to a client, is business driving. Travel between home and the regular place of employment is generally personal driving: reimbursing it is taxable.

A reasonable per-kilometre allowance

According to the CRA, an allowance based on the rates prescribed in section 7306 of the Income Tax Regulations is generally considered reasonable. For 2026, these rates are $0.73 per kilometre for the first 5,000 kilometres and $0.67 after that in the provinces, and $0.77 and $0.71 in the territories (source: CRA, page consulted on October 11, 2026). The type of vehicle or driving conditions may justify a different rate.

The allowance becomes taxable, in particular, if:

• it is a flat amount that does not depend on the number of kilometres driven;
• it combines a flat amount and a per-kilometre rate for the same use;
• the rate is not reasonable, too high or too low;
• you also reimburse expenses for the same vehicle (except supplementary business insurance, tolls and ferries, if they are not included in the allowance).

Ask for a kilometre log: date, destination and purpose of each trip. Without a log, the allowance is generally taxable.

Two examples

• Per-kilometre rate: an outreach worker at a Saskatchewan organization drives 6,000 km to visit families in 2026. With the CRA rates, the allowance is 5,000 km × $0.73 + 1,000 km × $0.67, or $4,320. She keeps a log: the allowance is generally not taxable.
• Flat rate: the CRA gives the example of a fixed monthly allowance of $600, paid regardless of the distance driven. It is not based on kilometres: it is taxable and added to employment income.

What an expense claim should contain

A complete claim can be checked in seconds:

• the person's name and the date of the claim;
• the date, amount and nature of each expense;
• the link to an activity or project of the organization;
• itemized receipts, or the kilometre log;
• the dated approval of the authorized person.

In Quebec

Revenu Québec generally considers reasonable the rate an employer may deduct under Quebec tax legislation. A rate that does not cover the employee's expenses is not reasonable. A non-taxable allowance is not reported on the RL-1 slip.

Volunteers

A volunteer is not an employee, but they sometimes incur costs for the organization. Reimbursing actual expenses against receipts remains the safest method. A fixed amount paid without any link to actual expenses can look like pay: have it reviewed by your accountant.

The volunteer who gives up their reimbursement

If your organization is a registered charity, the CRA allows an official donation receipt, under certain conditions:

• the volunteer must have a right to reimbursement for an expense incurred for the organization; you cannot simply issue a receipt instead of reimbursing;
• the recommended method: the organization reimburses the volunteer, who then voluntarily gives back an equal or lesser amount (an exchange of cheques), which leaves a clear trail;
• another option: treat the right to reimbursement as a non-cash gift, with a written direction from the volunteer confirming that right and asking for a receipt instead of reimbursement; the amount is then reported on the T3010 return as both revenue and expenditure;
• donated time and services are not property: they never qualify for a receipt.

The CRA also recommends having a volunteer reimbursement policy that specifies eligible expenses and the supporting documents required.

Good practices

1. Adopt a written policy: eligible expenses, limits, per-kilometre rate, approvals.
2. Require supporting documents: itemized receipts and a kilometre log.
3. Set a deadline to submit claims and a deadline to reimburse.
4. Separate roles: the person who approves is not the person being reimbursed.
5. Keep the receipts with the claim, for the audit and for the CRA or Revenu Québec.
6. Review your rates every year, when the CRA publishes the new ones.
7. Present the policy at hiring and at volunteer orientation: everyone knows what is reimbursed before spending, and claims arrive complete the first time.

How Samwell helps

• Expense reimbursement claims with receipt photos, for employees and volunteers.
• An approval flow based on your policy, where no one approves their own claim.
• Receipts kept with each claim, ready for the audit.

See the features or contact us.